Finance

A nonprofit, membership cooperative

OCLC is a nonprofit cooperative, funded by our membership’s use of shared services and programs. Our financial plans require us to balance costs, revenues and long-term sustainability. To do so, we set the goal of generating revenues over expenses of 2 to 4 percent. This goal helps us operate as efficiently as possible while investing wisely for the future.

We support cost-sharing principles

Member libraries share the cost of the cooperative by using our online services and software. In some years of extreme external financial downturns, OCLC has held prices flat. In other years it has been prudent to increase member costs to adequately invest in new services and technologies.

In a fast-changing environment, we must ensure that the cooperative is adequately funded to deliver the new services and programs members need to serve local users and communities. In that way, we can continue to help libraries reduce costs while providing better information access for the communities they serve.

Frequently asked questions

Who owns OCLC?

The OCLC cooperative is not owned by anyone. A nonprofit, library cooperative, OCLC is a membership organization whose public purposes are to further access to the world's information and reduce the rate of rise of library costs. Librarians guide the OCLC cooperative and help shape its services and direction. In contrast to a for-profit corporation, there are no shareholders.

The cooperative is governed by a 16-member Board of Trustees, more than half of whom are librarians. A 48-delegate Global Council, all of whom are elected by member libraries, meet at least once a year in person to articulate the interests and concerns of OCLC member libraries. Global Council delegates elect six Board members and ratify amendments to the OCLC Code of Regulations and Articles of Incorporation.

Does OCLC issue an annual report?

Yes. Each year, OCLC issues an annual report that highlights the cooperative's major achievements for the fiscal year. The report also includes key financial data and a review of the year's financial activity with links to the Report of the Audit Committee and to the audited financial statements. Beginning in 2014, the report became an online publication only.

Who audits OCLC's financial statements?

Deloitte & Touche, an international public accounting firm appointed by the OCLC Board of Trustees, audits the financial statements of OCLC.

Is OCLC tax-exempt?

Yes, the OCLC cooperative is tax-exempt under U.S. tax laws, which define "charitable activities" to include advancement of education. OCLC applied for exemption from US income tax on U.S Federal Form 1023 and was granted exemption in 1970.

The cooperative does pay sales tax in certain states and real estate taxes in the U.S. OCLC also pays income taxes in China and through its for-profit subsidiaries in Europe and Australia.

Each year, OCLC files a U.S. Federal Form 990 (a Return of Organization Exempt from Income Tax form), which includes information about officer and Trustee pay and policies as well as detailed data on revenues and expenditures. The form does not include the for-profit subsidiaries in the financial information presented.

Each year OCLC also files a US Federal Form 990-T (Exempt Organization Business Income Tax Return) which reports a small amount of income that is subject to US income tax.

Federal filings for the last three years:

U.S. Federal Form 990:

U.S. Federal Form 990T:

Why are OCLC subsidiaries considered “for profit”?

The European for-profit subsidiaries (companies owned by OCLC) provide computer library services to libraries similar to OCLC. However, under European law they do not qualify as "charities" and no other nonprofit legal organization type is available. Only "charities" are exempt from taxes in Europe. OCLC is not a "charity" but a library membership organization. Australian offices are taxable as well.

In the United States, OCLC is tax-exempt under rules that state an organization must be organized and operated exclusively for exempt purposes and none of its earnings may be paid to any private shareholder or individual. The exempt purposes set forth in the U.S. IRS Code Section 501(c)(3) are charitable, religious, educational, scientific, literary and other public purpose organizations.

OCLC, Inc. has offices in Canada and Mexico and their operations are exempt from taxes due to OCLC's nonprofit status in the United States. The Beijing office is taxable under Chinese law.

Does OCLC have a sustainability fund?

Yes, the investment portfolio provides a reserve operating fund that potentially would cover approximately 65% of operating expenses.

A significant portion of the investment portfolio secures library deposits under the subscription deposit program and unearned subscription revenue for library services. In addition, about $5 million in annual interest and dividends from the portfolio and other investments support the operations of OCLC, which reduces the cost-share prices to the cooperative.

Does OCLC make a profit?

With the concurrence of the Board of Trustees, the OCLC cooperative strives to operate in a financially responsible manner with cost-sharing revenues that slightly exceed expenses. The goal is to have an annual contribution, including income from the investment portfolio, on a five-year rolling average of 4 to 6 percent to maintain long-term financial viability in pursuing the cooperative's public purposes. OCLC recognizes that in some years it will meet or exceed that objective, while in others it will not.

Does OCLC engage in mergers and acquisitions?

Since 1999, OCLC has engaged in several mergers and acquisitions. The reasons are varied and include preserving member assets, expanding the membership and building presence outside the United States, enhancing current service offerings and reducing the development cost of new service offerings.

Could OCLC pay dividends to its members?

Under U.S. law for tax-exempt organizations, no dividends can be paid to members of the cooperative. In the event of OCLC's dissolution, the Board of Trustees would adopt a plan to distribute the cooperative's assets in a way that is consistent with the purpose of OCLC.

How much does OCLC spend on research and development each year?

Over the last five years, the OCLC cooperative has spent between $20 to $38 million annually on research and development. This includes development and enhancement of OCLC services and products as well as investment in OCLC Research.

Why and how does OCLC compensate its Board of Trustees?

Members of the OCLC Board of Trustees guide the activities and strategic direction of the cooperative. Service on the OCLC Board of Trustees requires a significant amount of time, both in preparation for and participation in board and committee meetings. In 1977, following an independent study of OCLC governance, it was recommended that members of the OCLC Board of Trustees should be compensated. That practice has been in place for more than 30 years. Compensation of individual trustees varies, based upon assignments and workloads. Compensation is determined by an independently reviewed policy. The most current review of board compensation was completed in 2010.

Compensation for board members and OCLC executives is reported on the IRS Form 990 tax return for nonprofit corporations. These forms are published and publicly accessible on the Web. See questions and answers about board compensation.

How does OCLC compensate its executive staff?

As in most organizations, executive compensation is determined by using market data, external compensation consultants, merit and historical benchmarks. Compensation for the CEO is set by the Board of Trustees. The CEO recommends appropriate executive compensation for other officers which is then reviewed and approved annually by the Board. OCLC's Board is comprised of librarian trustees elected through the organization's Global Council and non-librarian trustees, elected by the Board itself, from fields outside librarianship.